NJ Appellate Court Confirms Property Owners' Right to Compensation For Loss of Ocean View

Ocean City, NJ, November 17, 2009 — Damaged dunes from Tropical Depression Ida and nor’easter in Ocean City. (Photo credit: Wikipedia)

On October 28, 2013, the Superior Court of N.J., Appellate Division published an opinion in back to back appeals captioned Petrozzi v. City of Ocean City .  Both cases had their nascence long before Sandy casts its long shadow on New Jersey beaches and property owners.  Having no dune protection in place, in 1989, Ocean City reached out to the owners of the ocean-front property and asked whether they would agree to provide easements to the City to allow access to their private property and to build sand dunes for storm protection.  The property owners agreed with one significant proviso — the dunes would not block the property owners’ ocean views.  The City agreed to maintain the dunes so that they would never be higher than “three feet above the average elevation of the bulkhead.”  Therefore, the property owners gave a portion of their property rights to the City in exchange for the City’s promise to forever maintain the dunes at the agreed-upon elevation.

Most of the owners conveyed their private property to the City for the public good in 1991, before the Coastal Areas Facilities Review Act (CAFRA) was amended in 1994  to require DEP permission to maintain/reduce dune elevations.  Some of the owners did not make the conveyance until after 1994.

Due to natural accretion, the dune elevation steadily increased over the years.  In or about 2002, affected property owners demanded that the City sculpt the dunes back to the agreed-upon elevation.  However, CAFRA now required DEP permission, which the City sought in 2002.

In May of 2005, DEP denied the City’s requested permit.  Contemporaneous with the denial, several property owners sued to enforce the easement agreement.  At trial, the Superior Court dismissed all but four of the plaintiff’s claims reasoning that the 1994 amendments to CAFRA rendered the City’s ability to perform legally impossible.  The four plaintiffs excluded from that ruling were those that entered into the agreements after the CAFRA amendments, therefore impossibility was not a valid defense because the City knew they needed  a permit to perform.  As to those four plaintiffs, the judge presided over a trial on compensation for loss of view, loss of ocean breezes, and loss of access.  The judge found in favor of the property owners and awarded $70,000 to the first floor owners, and $35,000 to the second floor owners as compensation for their loss of view.

The Appellate Court held:  [T]he fact remains plaintiffs surrendered their right to compensation in reliance on Ocean City’s promise to protect their ocean views. Absent that reliance, Ocean City would have had to pay plaintiffs for depriving them of their views. If Ocean City may retain the benefit of this bargain despite its failure to perform its promise — even if performance was impracticable — without consequence, the municipality would reap a windfall at plaintiffs’ expense and plaintiffs would have given “something for nothing.”” (Slip op. at 19).

The appeals panel remanded the case back to trial, where the trial court is to value the “loss of, or interference with, their ocean views due to the accretive effects. But offset against the burdens suffered by plaintiffs are the potential gains conferred by the partial consideration performed by Ocean City to date, namely the non-speculative, reasonably calculable benefits arising from the municipality’s dune project. These may include the added wave/storm surge protection afforded by the accretive effect of the dunes. See Borough of Harvey Cedars v. Karan, 214 N.J. 384, 416 (2013).” (Slip. op at 20).

As the court noted, “In the first place, it is beyond question that plaintiffs suffered a loss of ocean view, that such a loss has value, and that the loss is compensable.”  This conclusion was consistent with a 1999 Appellate Division opinion in City of Ocean City v. Maffucci, where the court affirmed the compensability of a loss of ocean view caused by a taking of a dune easement.  But because the appellate panel disagreed with the trial judge’s valuation methodology, it ordered a new trial.

However, the Petrozzi court also confirmed that the compensation determination on remand must also abide by the ruling in Borough of Harvey Cedars v. Karan that “the quantifiable decrease in the value of their property — loss of view — should [be] set off by any quantifiable increase in its value — storm-protection benefits[.]” 214 N.J. at 418.

All in all, this latest opinion should serve to dispel some of the hype that followed this summer’s decision by the New Jersey Supreme Court in Karan.  While Karan prescribed a specific formula to be used in valuing dune replenishment easements, unlike much of the media coverage on the case, it did not conclude that the loss of ocean views is non-compensable.  Karan merely requires that any “reasonably calculable” benefit provided by the dunes be taken into account as an offset to the damage in value that the dunes have been proved to cause to oceanfront properties.

With approximately 1,000 new dune easement cases reported to remain along the Jersey Shore in the newest wave of dune replenishment cases, the recent Petrozzi case is instructive.

We’ll keep you posted.

See also the NJ.com article captioned: Ruling Gives Oceanfront Homeowners Compensation for Lost Ocean Views.

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• Dune Dilemma Continues In Ocean City (philadelphia.cbslocal.com)
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